Need return of enterpreneurial spirit
In the last few months I’ve been talking to many metalworkers about the deindustrialization of America. When the conversation turns to globalization and international trade, I’ve heard a lot of complaining about what isn’t fair. It goes something like this: The Chinese and other southeastern Asian competitors don’t have to carry the cost burden of safety and health regulations U.S firms face. Wages there amount to only pennies on the dollar. Foreign countries erect trade barriers to keep imports out while enjoying free access to the U.S. market. U.S. manufacturers are closing factories in the U.S. and moving them to Mexico, China, India, or some other low cost country to take advantage of cheap labor and some tax laws.
Foul! Foul! Foul! U.S. manufacturers are demanding their legislators do something to help them! There is no doubt about it. The speakers are right! The government should do something about some of the problems. Tariffs. Administrative trade barriers. Currency exchange rates. The list goes on. I’ve written reams about it.
However, at the same time I’ve heard government and association executives complaining that too often manufacturers are not taking advantage of the tax laws and trade help that are available. Executives I’ve talked to that are following the adage, “The Lord will help those that help themselves,” are definitely in the minority.
Stay close to customer
I then talked to Tom Plein. He owns an injection molding operation headquartered in San Diego. His plant was also there until he was forced to move it across the border to Tijuana because his major customers moved. Proximity to the customer is his major advantage, he says. It was either move or risk losing it all. “As a supplier we are pretty much the tail of the dog. Where the dog goes, we go,” he says.
He explains that the company had a customer in Tijuana that it was supplying from its plant in San Diego. “We knew they were looking for molders in their area but couldn’t find any of any quality. We also know it would be only a matter of time before someone filled that void. We felt if we were the first, it would give us a leg up on everybody else,” Mr. Plein explains. Since then he has opened a second plant in Mexicali because another major customer moved there. Again, it was move or lose the business. It was not something he relished doing-commuting over the border, playing by new, foreign rules. He feels he had little choice. In the end he saved some American jobs.
Asked how he feels about the globalization of the manufacturing world he answers: “Quite honestly, while it is tough on our business and we have lost business to China, I feel it is the natural evolution of things. That’s where low skill jobs are going to go. It’s just the way it is. Why would an American consumer pay more for a toaster that is made by someone making $10 per hour when he can buy the same toaster cheaper when it is made by someone making $1 an hour.
“The people who spend their time crying foul are tilting at windmills. They would be further ahead if they spent their time on how to become more productive; how to change their plant toward lean manufacturing or improving quality or becoming more efficient by investing in more automation and the latest manufacturing technology,” Mr. Plein says. Even in Mexico his plants have the latest equipment and computerized systems. He’s always looking to add value. Listening to him, it’s obvious the young American entrepreneur in a very competitive business is doing what he has to do to survive as an American company in a global economy.
“There are a lot of things that the government can and should do for us, but it is not going to level the playing field, so to speak, when it comes to wages,” Mr. Plein adds. “I’m not going to beat those guys [low wage countries] at their own game. I have to find how I can be competitive in what I do. And if that means I have to change some of what I have to do-add more value, go into larger parts that are harder to handle and ship-those are the things we have to look at and change.”
Many American manufacturers are just not very competitive, Mr. Plein says.
Get lean to compete
Jon Simpson, president of De-Sta-Co Industries, Detroit, agrees: “There is a lot of room for us to improve our productivity,” he tells me, claiming that value is only being added in the manufacturing cycle 5 percent of the time or less. “Machine tool sales are off 50 percent and the automation we are investing in is not growing either. We are not investing in relatively low-cost pick and place devices and tooling to keep those machines running,” he says.
Mr. Simpson comes from the old Acme-Gridley machine days when he says it might have taken two days to set up a machine to run it for one day. “Lean manufacturing is the name of the game today. That means wringing out costs and waste from everything from order entry, bookkeeping, and time on the machines to shipping and inventory,” he says. “Today machine tools can’t sit idle for two days without making money.” He knows working toward lean manufacturing pays off big and cites cases where a $20,000 investment in tooling and fixturing can bring a payoff in a month. He’s done it in his own shop. On its stamping machines, De-Sta-Co used to do 55 setups a day, each taking 2.25 hr. Now 200 setups daily each take only 20 min.
“We have proven we can manufacture parts here in the middle of Detroit with the UAW and all the bells and whistles that go with it as cheaply as they do in China,” Mr. Simpson says. “We in America have kind of rolled over on this thing. When I am competing with the Chinese I have to change the rules of the game. If I continue to manufacture the way they do, their costs will be half of mine. The rules of the game include understanding what all my costs are and what I have to do to achieve lean manufacturing. That’s where I fear a lot of American manufacturers gave up and simply decided to put a factory in China,” Mr. Simpson concludes, adding that the only way we are going to keep jobs in America is through technology.
Tap skills and knowledge
“We have to leverage the depth of knowledge that is inherent in the skill and expertise that has taken 200 years (of the industrial revolution) to develop,” agrees Glynn Fletcher, president, Agie Ltd., EDM manufacturer. “We have to find a way of competing against those countries that have lower labor costs than we do.
“U.S. manufacturers should not be concentrating on competing with China over low tech, high volume production jobs, but rather against each other for high tech, knowledge-based markets in the medical, aerospace, and nanotechnology areas.”
He feels the reality is that manufacturing’s innovative process is the key to our society’s future prosperity and higher standard of living. The process starts with an idea for a new product that prompts investment into research and development. R&D success, in turn, leads to investment in equipment and jobs.
Unfortunately, Mr. Fletcher perceives a diminishing of the entrepreneurial spirit that was behind so many advances in the metalworking manufacturing sector. “Individuals that struck out on their own with an idea to start a company had a fire in their belly. They were committed, worked hard, put in many hours to make a success of their company. Now, 30 or 40 years later they have achieved a level of success and wealth and have more to risk. Their entrepreneurial spirit has waned. The younger breed coming out of engineering schools aren’t that interested in manufacturing. They lack that fire in the belly. They see only the negative side of manufacturing and little of the excitement, technology and potential,” Mr. Fletcher says.
Invest in technology
I’ve also run into the companies that Mr. Fletcher is describing. They are sitting back expecting that a rebounding economy will bring their business back. They don’t understand that the market has undergone systemic globalized changes-that the factory in China is as much a competitor as the shop down the street.
Brian Papke, president, Mazak USA, a machine tool builder, is convinced “if a company is sitting there saying as soon as the economy comes back, I’m going to do better, they are not going to make it. When the economy comes up it will be only the efficient companies that survive. It’s near impossible to use old equipment to create a build-to-demand manufacturing system in an effort to make your operation more efficient.”
He feels there are still far too many operations using old equipment and old manufacturing techniques. “It’s getting better but as a percentage of the equipment that is out there, it is way too small,” Mr. Papke says. That’s what you would expect someone selling machine tools to say. But Mazak has put its money where its mouth is. “We have proven it in our own factory. The breakeven point in our manufacturing operation has gone down significantly with our investment. I know it works. It has happened because we have, and continue to invest in the machines and processes that can make use more efficient,” Mr. Papke says.
Finding money to make investments in a down economy isn’t easy. Banks shy away from lending money for new equipment when the equipment you have is only working at 60 percent of capacity.
But, as Al Moore, president, AMT-The Association For Manufacturing Technology, tells me, it’s tough to beat up on the customers of machine tools because they don’t have a lot of money in their pocketbook. “Even so, wherever your customer is you have to be there. It’s survival at this point. The only way your business can come back at all is if the company is investing in new ideas and technology. Now is the time. I understand their plight-their empty pocket books but they have to find the wherewithal to make the investment in not only new technology but also in cutting costs of your operations.”
Copyright Nelson Publishing Oct 2003
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